Mumbai: Shares of InterGlobe Aviation Ltd, parent of the country’s largest airline IndiGo, on Thursday plunged nearly 11%, its steepest fall since August 2016, after the company reported a 75% drop in its March-quarter earnings a day earlier.

IndiGo shares fell 10.57%—its most fall since 2 August 2016—to close at Rs1,205.80 on BSE. In intraday trade, the stock slumped as much as 17.57% to Rs1111.30 a share—a level last seen on 18 October 2017.

So far IndiGo stock has risen 0.4% this year. The scrip declined 20% since touching a record high on 20 April, eroding over $1.72 billion in market value.

Shares of IndiGo rivals Jet Airways India and Spicejet Ltd fell 12.3% and 6.1%, respectively.

IndiGo reported a net profit of Rs117.64 crore during the quarter, down from Rs440 crore a year ago due to costlier fuel, lower yields and foreign exchange (forex) loss.

Revenue grew 17.8% from ,141.99 crore a year ago to ,056.84 crore in the latest quarter as the airline flew more passengers. However, fuel cost during the quarter rose to ,338 crore from ,751 crore a year ago. The company booked a forex loss of 92.50 crore on account of rupee depreciation in the quarter.

IndiGo’s management told analysts on Wednesday that the airline will keep its cost lowest in the industry to battle the headwinds—high fuel costs, lower yields and a competitive pricing—at a time when fuel costs and discounted ticket fares are unsustainable for the industry.

However, the airline saw its total cost during the March quarter increase by 30% to Rs5,890.64 crore from the same period a year ago.

The company said in a statement to the BSE that its latest numbers include certain credits received from manufacturers to offset impact of aircraft groundings and delivery delays. The company, however, didn’t reveal details on the same.

According to a person aware of the matter, IndiGo made Rs150-180 crore on the account of sale and leaseback of aircraft during the March quarter. However, Mint couldn’t independently verify this.

The airline didn’t reveal the compensation it received from Pratt & Whitney due to the grounding of some of its Airbus planes during the quarter. During January-March, IndiGo had grounded 11 Airbus A320 Neo aircraft due to engine glitches. The airline leased aircraft during the period to ramp up its capacity.

IndiGo said its finance income during the March quarter—earned from fixed deposits and mutual funds—stood at Rs248 crore. Had it not been for the ‘certain credits the airline received from manufacturers to offset impact of aircraft groundings and delivery delays, and its finance income, the airline would have likely reported a loss during Q4 of FY18.

Going ahead, sharp uptick in jet fuel prices, and rupee depreciation (bulk of cost is USD denominated) could impact profitability given high price sensitivity of the Indian consumer leaving limited ability to pass on costs, said an Edelweiss report on InterGlobe Aviation dated 2 May.

“Economic slowdown putting pressure on demand for corporate and leisure travel will impact load factors and hence profitability given the high operating leverage structure of the airline business," the report added.

The yields have been weak as airlines have not passed on the impact of higher fuel prices, said IDFC Securities in a note to its investors on 3 May.

“As such we expect yields to improve in first quarter of fiscal year 2019 in response to higher fuel prices and favourable seasonality," the IDFC report said, adding that fuel prices that have continued to rise during Q1FY19 will give rise to incremental pressure on margins and earnings.

After accounting for the recent surge in fuel prices, IDFC has lowered its fiscal year 2019-20 estimates earnings by 19.5%-11.1%. The firm has also downgraded the stock to “Neutral" and cut price target by 12% to Rs1,293 a share.

Among the analysts covering the stock, 16 have a “buy" rating, three have a “hold" rating, while one have a “sell" rating, Bloomberg data showed.

IndiGo shares started falling after its president Aditya Ghosh resigned on 26 April. Mint reported on 3 May that Securities Exchange Board of India (Sebi) is looking into a plunge in shares of the company just before it announced the resignation of its top executive Aditya Ghosh.

Various reports suggested that Ghosh’s resignation came as the airline saw several of its aircraft grounded due to engine glitches, and after criticism by parliamentary panel over the discourteous behaviour of its staff. The airline’s decision to withdraw from race to buy stake in divestment-bound national carrier was also attributed to his exit.

However, InterGlobe Aviation co-founder and director Rahul Bhatia dismissed speculation that the exit of Aditya Ghosh had anything to do with the turbulent year that IndiGo, the airline operated by the company, has experienced, including the trouble it has been having with the engines of its Airbus A320neo aircraft. Ghosh himself said that it was the managements’ decision to not to bid for Air India, and not his alone.

IndiGo’s co-founder Rahul Bhatia told analysts on 2 May that the airline will not shrink its capacity but expand further, despite seeing its profits shrink during the March quarter.

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